What is ATS.L's Intrinsic value?

Artemis Alpha Trust PLC (ATS.L) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Artemis Alpha Trust PLC's estimated intrinsic value ranges from $250.70 to $667.51 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Discounted Cash Flow (10Y) $667.51 +80.9%
Discounted Cash Flow (5Y) $622.01 +68.6%
Dividend Discount Model (Multi-Stage) $250.70 -32.1%
Dividend Discount Model (Stable) $293.85 -20.4%

Is Artemis Alpha Trust PLC (ATS.L) undervalued or overvalued?

With the current market price at $369.00, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Artemis Alpha Trust PLC's intrinsic value, including:

  1. Discounted Cash Flow (DCF): Values the company based on projected future cash flows
  2. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 4.0% 4.5%
Equity market risk premium 6.0% 7.0%
Adjusted beta 1.69 1.79
Cost of equity 14.1% 17.5%
Cost of debt 4.6% 4.6%
Tax rate 0.6% 0.8%
Debt/Equity ratio 1 1
After-tax WACC 9.3% 11.0%

Valuation Methods

1. Discounted Cash Flow (DCF) Valuation

Our DCF model projects cash flows over 5-year and 10-year horizons, with the following key assumptions:

  • Forecast Period: 5-year DCF and 10-year DCF
  • Terminal Growth Rate: 0.0% (range: 3.0% - 5.0%)
  • Discount Rate: 10.2% (range: 0.0% - 9.3%)

Key Projections:

  • Revenue growth from $20 (FY04-2024) to $27 (FY04-2034)
  • Net profit margin expansion from 87% to 87%
  • Capital expenditures maintained at approximately 0% of revenue
DCF Model Fair Value Enterprise Value % from Terminal Value
5-Year Growth $622 $202M 62.2%
10-Year Growth $668 $217M 40.6%
5-Year EBITDA $460 $149M 48.7%
10-Year EBITDA $554 $179M 28.2%

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 11.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 15.8%
  • Long-term growth rate: 0.5%
  • Fair value: $250.70 (-32.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 17.5% (Low) to 14.1% (High)
  • Long-term growth rate: 0.0% (Low) to 1.0% (High)
  • Fair value range: $216 to $371
  • Selected fair value: $293.85 (-20.4% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $121M
Enterprise Value $119M
Trailing P/E 6.82
Forward P/E 6.52
Trailing EV/EBITDA 5.95
Current Dividend Yield 173.89%
Dividend Growth Rate (5Y) -1.76%
Debt-to-Equity Ratio 0.85

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Discounted Cash Flow (10Y) 33% $200.25
Discounted Cash Flow (5Y) 28% $155.50
Dividend Discount Model (Multi-Stage) 22% $50.14
Dividend Discount Model (Stable) 17% $44.08
Weighted Average 100% $499.97

Investment Conclusion

Based on our comprehensive valuation analysis, Artemis Alpha Trust PLC's weighted average intrinsic value is $499.97, which is approximately 35.5% above the current market price of $369.00.

Key investment considerations:

  • Strong projected earnings growth (87% to 87% margin)
  • Consistent cash flow generation

Given these factors, we believe Artemis Alpha Trust PLC is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.